Legal Environment for Business in Nepal April 2017 Company Legal Environment for Business in Nepal April 2017 Saroj Shrestha

Company Company is an artificial person that is created, operated and ended by the law. A company is a form of business organization, in which the funds of a large number of investors are managed by a committee of representatives. Company Act, 2063 section 2 (a) defines the term ‘company’ means a company incorporated in accordance with this Act’.

Company A company is a legal person just like a an individual but with no physical existence. This concept is defined in a leading British case (Saloman Vs. Salomon & Company (1897), that – “A company is a ‘legal person’ or ‘legal entity’ separate from , and capable of surviving beyond the lives of it’s members, capable of rights and duties of its own and endowed with the potential of perpetual succession”. This definition of a company is not only applies to joint stock company but also to single man company.

Company The Saloman case indicates the following elements: Company is Separate legal entity Separate from the survives beyond the lives of its members Capable of rights and duties Potential of perpetual succession.

Company Characteristics of a Company 1. Incorporated association 2. Voluntary association 3. Legal entity 4. Permanent existence 5. Common seal 6. Limited liability 7. Transferability of shares 8. Management by representatives 9. Contractual capacity 10. Registered office

History of Company Act in Nepal Nepal Company Kanoon 1993: Influenced by the British Company Law which was issued by Rana Prime Minister Juddh Samsher. Biratnagar Jute Mills Limited was established in Ashad 30, 1993 under the Nepal Company Act, 1993. Company Act of Nepal 2007 with amendments in 2018, 2019, 2021 were activated. Company Act, 2021played a important role for the development of company in Nepal

History of Company Act in Nepal Company Act, 2021 was amended eight times in 2025, 2028, 2030, 2031, 2041, 2043, 2046 and 2048. The act was replaced by the Company Act, 2053 Then Company Ordinance 2062 came into force. Now Company Act, 2063 was promulagated on Kartik 24, 2063. It has 21 Chapters and 188 Sections.

Types of Company Private Company: Sec. 2 (b) of Company Act, 2063 contains that ‘the company incorporated under this act is a Private Company’. The number of shareholders must not be crossed fifty members’ The members of such company cannot sale its share and debentures to others openly in the market. And the shares and securities are to be sold and transferred only to the members, as accordance to its Memorandum , Articles and Consensus Agreements.

Types of Company 2. Public Company: Sec. 2 (c) of Company Act, 2063 contains that ‘the companies incorporated under this Act other than other than the private company are public company .’ The number of the promoters must be more than seven members for a public company. In case, a public company is to be established by any public company, this restrictive rule does not apply. Members can sale its shares, debentures and securities to the public in open market.

Types of Company 3. Non profit Distributing company: The Company Act, 2063 has provided the provision of such types of companies. According to Chapter 19 of Company Act, 2063 ‘a company not for distributing profit’ can be registered for the purpose of develop or prosper any professional or protecting interest of any group of society or welfare of the society. The company not for distributing profits are incorporated with the following conditions:

Non Profit distributing company To protect common interest of group of persons or welfare of the society, To manage to keep on the members not less than five persons, To terminate the company automatically in case of merger, deregistration or death of any member of the company, Not to transfer the membership by any manner, Not any term like ‘Co’, Pvt. , Ltd. , except the pre- consent of the office of company registrar, To the extension of any branch consent of the office is necessary.

If you have any questions or concerns, please discuss .. Thank you ! Saroj Shrestha